Owners who are starting to think about selling usually ask two questions first. One is what the business is worth. The other is how long a sale will take, and that's the harder one to answer, because so much depends on how ready the business is and who buys it. A manager who already knows the business can move faster than a stranger who has to learn it from scratch.
What's predictable is the order things happen in. This guide goes through each stage of a sale in the UK, and what you can do to shorten it.
The stages of a sale
| Stage | What happens | What sets the pace |
|---|---|---|
| Getting ready | Deciding what you want, tidying the accounts, reducing how much the business relies on you, gathering documents | How ready the business already is, and the two-year conditions for tax relief |
| Finding a buyer | A rough valuation, then approaching buyers yourself or through a broker | Who you approach, and how quickly they can look |
| Heads of terms | Agreeing the price, how it's paid and your role afterwards | How far apart you are, and how much is left open |
| Due diligence | The buyer checks the figures, tax, contracts, property and staff | How ready your documents are, and how fast you answer |
| Legal documents | Drafting and agreeing the sale agreement and the disclosure letter | How much was settled in heads of terms |
| Consents and completion | Getting any consents needed, then signing and payment | Other people, such as landlords and regulators, who work to their own timetables |
Due diligence and the legal documents usually run side by side, so those two stages overlap. Getting ready often takes the longest, and it's the one owners are most tempted to skip.
Getting ready takes longer than owners expect
Buyers pay more, and move faster, when the accounts are clean and the business doesn't depend on one person. If the customers ring you and the team waits for your decisions, building a manager who can run the day to day is the most valuable thing you can do before a sale. It's also the slowest. The official business advice site for Northern Ireland, nibusinessinfo.co.uk, says it can take several years to get a business to the point where it's ready to sell.
Tax adds a fixed point. To claim Business Asset Disposal Relief on a share sale, you usually need to have held at least 5% of the shares and votes, and been a director or employee of a trading company, for the whole two years before the sale. If you've recently issued shares, or stepped down as a director, check the dates before you set a timetable. For tax, the date of a sale is usually when the contract is made, or when any conditions in it are met, which can be before completion.
Finding the right buyer
How long this takes depends on who the buyer is.
- Someone who has approached you can move quickly, because they've already chosen your business. There may be less competition on price.
- A broker or corporate finance adviser will prepare an information pack, approach a list of buyers and run a process with deadlines. It takes longer to set up, but it can bring more than one offer.
- Your managers usually need to raise money from a bank or an investor, who will do their own checks. Our guide to management buyouts covers how that works.
- A larger business in your sector may need its own board or lender to approve the purchase, and will want to plan how your business fits with theirs.
From heads of terms to completion
Once you sign heads of terms, the buyer usually has a period of exclusivity, when you agree not to talk to anyone else. The buyer's due diligence and the legal documents happen during it. In a share sale the main document is the share purchase agreement, with a disclosure letter alongside it, and a shareholders' agreement if you're keeping a share.
Exclusivity is the nearest thing a sale has to a deadline, so set it with care. If it's too short you'll be asked to extend it, and if it's too long nobody is in a hurry. Ask for a set end date, with an agreed timetable for the main steps.
A share sale usually has fewer moving parts
How you sell changes how much has to be done. In a share sale, the buyer buys the company, so its contracts, lease, licences and staff stay where they are. Some contracts and leases still need consent if they say so, but most things carry on untouched.
In an asset sale, the company sells the business and its assets, and each part has to be moved across. Leases have to be assigned and contracts transferred, often with the other side's agreement. Staff move to the buyer under the TUPE regulations, and licences or registrations may need to be applied for afresh. Each of those is a step someone else controls, so an asset sale often takes longer, even for a small business.
Things outside your control
Some of the timetable belongs to other people. These are the usual ones.
- Your landlord. If the lease has to be assigned to the buyer, the landlord's consent is usually needed. Where the lease says consent can't be unreasonably withheld, the law says the landlord must decide within a reasonable time, but it doesn't say how long that is, so ask early.
- Lenders. The buyer's bank will want its own checks, and your own lenders may need to be repaid or to agree to the sale.
- Regulators. Some businesses can't change hands without approval. For a firm regulated by the Financial Conduct Authority, the FCA has up to 60 working days to assess a change in control once it has a complete application.
- HMRC. If you apply for statutory clearance, asking HMRC to confirm in advance how part of a deal will be taxed, HMRC says it will reply within 30 days.
- Your team. In a sale of the business and its assets, the seller must give the buyer information about the staff who'll transfer at least 28 days before the transfer, under the TUPE regulations.
- Customers and suppliers. Contracts that can end if the business changes hands may need the other side's agreement before completion.
How to sell a business quickly in the UK
Some owners need to sell sooner than they'd planned, because of their health or a change in the family. A quicker sale is possible, but it usually means accepting a lower price or more of the price paid later, because fewer buyers get the chance to compete. These are the things that make the most difference to speed.
- Have the documents ready before you start. A complete data room on the first day takes most of the waiting out of due diligence.
- Know your figures. Up to date management accounts and a clear list of adjustments to profit, with evidence.
- Talk to buyers who can pay. Ask early how they'll fund the purchase, and whether their lender has seen it.
- Keep heads of terms clear. Points left vague come back during the legal work.
- Line up your advisers in advance. A solicitor who handles company sales and an accountant who knows the tax, both briefed before you sign heads of terms.
- Raise consents early. Speak to your landlord, and to any regulator, before you need an answer.
- Answer questions fast. A slow reply from your side is the easiest delay to avoid.
What tends to slow a sale down
- Figures that don't reconcile, or adjustments to profit without evidence.
- Surprises in due diligence, which lead to the price being renegotiated.
- Arguments about cash and working capital that should have been settled in heads of terms.
- The tax structure being decided late, after the price is agreed.
- The owner being too busy running the business to answer questions.
A sale doesn't always end at completion
If you've agreed to an earn-out or kept a share, your part in the business carries on after completion, sometimes for years. A handover period does the same on a smaller scale. Count that in when you think about how long selling will take. If you'd like a sense of where you stand now, our readiness check takes about five minutes and asks about you and the business, not the price.